Ina Fried

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The Inside Story on the Angry Birds’ Massive Funding Round

While many companies would love to raise tens of millions of dollars in their first major round of venture funding, the folks at Rovio took some convincing.

After all, the folks behind Angry Birds have shown they have plenty of ways to make money, from selling downloads, to in-app purchases, to advertising and toys.

“They didn’t really need the capital,” says Rich Wong, whose Accel Partners was among the investors in the $42 million Series A round announced on Thursday. “It took them a while to convince them of the ways we might be able to help.”

Wong said the talks started last summer and took about nine months to complete.

Rovio’s Mikael Hed said that the dealings with the venture capital firms were somewhat ironic. For years, the company would have given anything for Sand Hill Road to take an interest in one of the company’s projects. Then Angry Birds took off, and suddenly people were beating down their door.

“Suddenly everyone wanted to talk to us and we realized we didn’t really need their money,” Hed said.

Eventually, though, Rovio decided to take some venture funding. In addition to Accel, Rovio’s new investors include Felicis Ventures and Atomico Ventures, the firm created by Skype co-founder Niklas Zennström. Zennström is also joining Rovio’s board.

“All of these people have been there to build billion dollar companies,” Hed said.

Rovio is not in that category yet, but certainly has a good start.
Details of the valuation were not announced, though sources said the total value is still in the hundreds of millions, rather than the billions.

“While being valued at a billion or several billion dollars isn’t an end goal in itself, it’s an interesting metric,” Hed said.

As for how the deal came together, Wong said he had known Rovio’s Peter Vesterbacka for years, from his days establishing the non-profit Mobile Monday effort. The volunteer-run collaboration project started in Helsinki in 2000 and has expanded all over the world, including an active chapter in Silicon Valley.

Wong notes that AdMob and GetJar–two of his firm’s big mobile investments–can trace their roots to Mobile Monday. AdMob, for example, connected with its first engineer thanks to MoMo, as members call the gatherings.

In any case, Wong said he is thrilled to be part of what is clearly one of the hottest things going.

“I’ve literally been waiting 10 years working in the mobile industry (for something) that is truly this mass market and broad scale,” he said. “It’s almost as simple as that.”

Wong, who grew up in Charles Schultz’s hometown of Santa Rosa, said Angry Birds has the chance to be for this generation what Peanuts and Pac-Man were for him. Among those who convinced him of that were his children and nieces and nephews, all of whom love the birds.

“They really love Angry Birds more than anything else,” he said, adding that perhaps his two-year-old would still pick Curious George, but that all the other ones are sold on Angry Birds.

“Maybe this is their Peanuts and Pac-Man and Super Mario Brothers,” he said.

Hed said he likes the Super Mario analogy, saying the company sees that kind of opportunity, but is careful not to move things too quickly.

“Every step we have taken we are mindful of not overextending the brand,” he said. Clearly one of the challenges for Rovio is going to be expanding with out becoming oversaturated and growing beyond its single hit.

That said, the company already has 40 or so projects in the works–almost as many as it has employees. (There are approaching 60 people at Rovio, all based in Helsinki, Finland.)

Hed said that the company has taken to use Google Docs to keep track of all of the things it has going on at any given moment.

“We do need a spreadsheet for that,” Hed said.

Wong said that the company has solid plans for this year and beyond, noting its efforts to evolve Angry Birds with both the frequently updated “Seasons” version and with the Angry Birds Rio game, which is a movie tie-in with a Twentieth Century Fox film due out in April. Rovio has also talked about a Facebook version coming in May and console games are also on the way.

“There’s a diverse range of products coming out including gaming products,” Hed said. “The pigs will be more prominently in play in the future I can tell you that.”

Beyond app sales and advertising, the company has sold 2 million plush toys and says that 40 percent of new iOS players are purchasing in-game help in the form of a “mighty eagle.”
But with so many eyeballs on Angry Birds–40 million people play each month–Wong said there is an opportunity for the company to influence the entire ecosystem based on which brands are featured within its properties. This week’s deal with Microsoft’s Bing is just an early example, he said.

Hed noted that the company also sees an opportunity to acquire other brands or help lesser-known companies get published.

Wong said he was also impressed with the Rovio team’s dedication. As has been widely noted, Angry Birds was the company’s 52nd game.

“I love the quote that this was an overnight success that took eight years,” Wong said.